Funding Rates crash as CBN Refunds banks for lost FX bids

Culled—Proshare

November 28, 2017/Zedcrest Capital 

KEY INDICATORS

Inflation 15.91% Declined by 0.07% in October from 15.98% in September 2017
MPR 14.00% Left unchanged at 14.00% at the MPC meeting of November 2017
External Reserves $34.53billion Accreted 2.04% as at 24th November from $34.49bn on 23rd November 2017
Brent Crude $63.08pb Fell by 0.35% from $63.28pb on 24th November 2017

Bonds

The bond market traded on a slightly bullish note, with some buys on some maturities taking yields lower by 4bps across the curve. Client demand however remains scanty, as market direction has remained largely driven by speculative biases. We expect the market to trade on a relatively quiet note tomorrow, but with a slight bearish bias.

Benchmark FGN Bond Yields
Description Bid (%) Offer (%) Day Change (%)
16.00 29-Jun-19 14.58 14.51 (0.15)
15.54 13-Feb-20 14.41 14.34 0.00
14.50 15-Jul-21 14.81 14.74 0.00
16.39 27-Jan-22 14.39 14.32 (0.01)
14.20 14-Mar-24 14.68 14.61 (0.02)
12.50 22-Jan-26 14.61 14.54 (0.04)
16.29 17-Mar-27 14.80 14.73 (0.06)
12.15 18-Jul-34 14.50 14.43 0.01
12.40 18-Mar-36 14.44 14.37 (0.15)
16.25 18-Apr-37 14.45 14.38 (0.01)

Source: Zedcrest Dealing Desk

Treasury Bills

The T-bills market traded on a bearish note, as market players continued selling the short end (Dec – Feb) maturities. Average T-bill yields consequently rose by 16bps to 17.88%. We witnessed further decline in OMO rates today as the CBN sold N13.76bn 93-day and N10.56bn 191-day bills at 15.80% and 17.55% respectively. The CBN would offer a total of N117bn T-bills at its primary auction scheduled for tomorrow. We expect rates at the auction to clear at the following levels: 13.00 – 13.20 (91days), 15.25 – 15.45 (182days), 15.45 – 15.65 (364days).

Benchmark Treasury Bills Rates
Description Bid (%) Offer (%) Day Change (%)
7-Dec-17 16.40 16.15 0.50
4-Jan-18 16.60 16.35 0.10
1-Feb-18 16.80 16.55 0.00
1-Mar-18 15.40 15.15 0.15
5-Apr-18 16.90 16.65 0.00
3-May-18 17.55 17.30 0.00
14-Jun-18 17.45 17.20 (0.25)
5-Jul-18 17.25 17.00 (0.30)
2-Aug-18 16.75 16.50 0.00
13-Sep-18 15.30 15.05 0.00
4-Oct-18 15.25 15.00 0.00

Source: Zedcrest Dealing Desk

OMO – 28 November 2017
Tenor Rate (%) Offer (NBn) Sub (N’bn) Sale (N’bn)
 93 day 15.80 20.00 14.02 13.76
191 day 17.55 100.00 33.64 10.56

Source: CBN 

NTB Auction Expectations
Tenor Offer (N’bn) Expected Stop Rate (%)
91 days 26.14 13.00 – 13.20 
182 days 11.01 15.25 – 15.45
364 days 80.03 15.45 – 15.65 

 Money Market

The OBB and OVN rates crashed to 12.67% and 13.58% from 30% levels the previous day. This was due to inflows from retail FX refunds by the CBN, which helped to calm funding pressures in the market. System liquidity is however estimated to close today at N41billion short down from a negative opening figure of N22bn due to debits for today’s OMO. Rates are expected to remain calm tomorrow, as there are no significant outflows expected.

Money Market Rates
Current (%) Previous (%)
Open Buy Back (OBB) 12.67 32.50
Overnight (O/N) 13.58 35.33

Source: FMDQ, Zedcrest Research 

FX Market

The CBN Official spot rate remained stable at its previous day rate of N305.80/$. Its external reserves is also recorded to have improved by 2.04% to $34.53billion as at 21st of November 2017.

Rates at the Investors and exporters FX window closed at N360.37/$ from N360.32/$ in the previous session. Rates at the parallel market however stayed flat at N361.70/$. 

FX Rates
Current (N/$) Previous ( N/$)
CBN Spot 305.80 305.80
CBN SMIS 330.00 330.00
I&E FX Window 360.37 360.32
Parallel Market 361.70 361.70

Source: CBN, FMDQ, REXEL BDC

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